Home Price Gains Being Led by Usual Suspects

Home price gains picked
up the pace again in November according to the S&P CoreLogic Case-Shiller
U.S. National Home Price Index. The index,
which covers all nine U.S. census divisions, rose 6.2 percent compared to
November 2016. The annual increase in
October was 6.1 percent. On a monthly basis the index gained 0.2 percent on a
non-seasonally adjusted basis and was up 0.7 percent after adjustment.

Case-Shiller’s two city-based composite indices also
indicated faster appreciation than in the previous report. The 10-City Composite annual increase rose
from 5.9 percent in October to 6.1 percent, and the 20-City index was up 6.4
percent compared to 6.3 percent a month earlier. The 10-City and 20-City
Composites reported increases of 0.3 percent and 0.2 percent respectively
before seasonal adjustment, and 0.8 percent and 0.7 percent gains afterward.

Ten of 20 cities reported increases in November before
seasonal adjustment, while all 20 cities posted gains after adjustment. Seattle,
Las Vegas, and San Francisco had the highest year-over-year gains among the 20
cities. Seattle led the way with a 12.7 percent
year-over-year price increase, followed by Las Vegas, with 10.6 percent appreciation,
and San Francisco which was up 9.1 percent. Appreciation was greater in six
cities for the year ended in November than their annual increase in October.

David M. Blitzer, Managing Director and Chairman of
the Index Committee at S&P Dow Jones Indices, noted that home prices
continue to rise three times the rate of inflation. “The S&P CoreLogic Case-Shiller National
Index year-over-year increases have been 5 percent or more for 16 months,” Blitzer
said, while “the 20-City index has climbed at this pace for 28 months. Given
slow population and income growth since the financial crisis, demand is not the
primary factor in rising home prices. Construction costs, as measured by
National Income and Product Accounts, recovered after the financial crisis,
increasing between 2 percent and 4 percent annually, but do not explain all of
the home price gains. From 2010 to the latest month of data, the construction
of single family homes slowed, with single family home starts averaging 632,000
annually. This is less than the annual rate during the 2007-2009 financial
crisis of 698,000, which is far less than the long-term average of slightly
more than one million annually from 1959 to 2000 and 1.5 million during the
2001-2006 boom years. Without more supply, home prices may continue to
substantially outpace inflation.”

Blitzer continued, “Looking across the 20 cities
covered here, those that enjoyed the fastest price increases before the 2007-2009
financial crisis are again among those cities experiencing the largest gains.
San Diego, Los Angeles, Miami and Las Vegas, price leaders in the boom before
the crisis, are again seeing strong price gains. They have been joined by three
cities where prices were above average during the financial crisis and continue
to rise rapidly – Dallas, Portland Oregon, and Seattle.“

As of November,
the National Index had exceeded the previous price peak set in July 2006 by 6.1
percent. The Index has experienced a 46.2 percent rise from the trough reached
in early 2012. The two city composites
have not yet regained their June 2006 record high levels but are back to those
in the winter of 2007. The 10-City
remains down from its peak by 3.6 percent and the 20-City by 1.1 percent.

The S&P
CoreLogic Case-Shiller Home Price Indices are constructed to accurately track
the price path of typical single-family home pairs for thousands of individual
houses from the available universe of arms-length sales data. The National U.S.
Home Price Index tracks the value of single-family housing within the United
States. The indices have a base value of 100 in January 2000; thus, for
example, a current index value of 150 translates to a 50 percent appreciation
rate since January 2000 for a typical home located within the subject
market.

The National Index set another new
all-time high in November; 195.94, up from last month’s peak of 195.63. The 10- and 20-City Composites had readings
of 218.21 and 204.21 respectively. Los
Angeles claims the highest index reading at 270.16. Detroit’s reading is lowest at 117.55